Don't try to get rich twice
Warren Buffett once gave a talk to a group of MBA students at the University of Maryland.
A student asked the Oracle of Omaha to name some common errors successful people make with their money.
Buffett told the class:
“Anyone who has become rich twice is dumb.
Why would you risk what you need and have for what you don’t need?
If you are already rich, there is no upside to taking on a lot more risk, but there is a disgrace on downside.
The problem is that making money and keeping money are two very different skill sets. It can be difficult to transition from a mindset of risk-taking to do-no-harm.
The good news is while there are numerous ways to build wealth, there are just a handful of ways to screw it all up:
- Placing your trust in the wrong person or organization.
- Taking too much risk.
- Holding concentrated positions.
- Lacking sufficient diversification.
- Using too much leverage.
- Investing in things that sound too good to be true.
- Having unrealistic return expectations.
Unfortunately, an insatiable desire for more makes it difficult to avoid these pitfalls.”
Only take the risks to achieve what you need.
Don’t copy others; risk capacity or risk preference. Your requirements are different.
If you have no idea how much is enough, you’ll never be satisfied with what you have.